Devon Owns 40% of the Agate Company for Which His

question 43

Multiple Choice

Devon owns 40% of the Agate Company for which his basis is $300,000. He sells one-fourth of his ownership interest to Bernice for $100,000. Which of the following statements is correct?

• A) If Agate is an S corporation, Devon has a recognized gain of $25,000, some of which may be capital and some of which may be ordinary income.
• B) If Agate is a C corporation, Devon has a recognized capital gain of $25,000.
• C) If Agate is a partnership, Devon has a recognized capital gain of $25,000.
• D) Only b. and c. are correct.
• E) a., b., and c. are correct.

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